CORRECTED-(OFFICIAL)-UPDATE 1-GM Canada plant to finish at least 70,000 trucks a year after deal -sources

Reuters Staff

3 Min Read

(Corrects current and future production estimates from AutoForecast in fifth paragraph)

By Allison Martell and Susan Taylor

TORONTO, Sept 22 (Reuters) - General Motors Co’s Oshawa plant will do final assembly work on at least 70,000 pick-up trucks a year once investments promised in its Canadian unit’s new labor agreement are complete, according to two sources close to negotiations.

GM reached a tentative labor deal with Unifor, the union that represents its Canadian manufacturing workers, early on Tuesday, saving thousands of jobs at the Oshawa plant, but the two sides declined to say what new vehicle would be produced there.

On Wednesday Reuters reported that the plant would do final assembly of Silverado pick-up trucks using bodies shipped from the GM plant in Fort Wayne, Indiana, boosting the automaker’s production of the strong-selling model.

But production volume, crucial to staffing levels at the plant, was not immediately clear. On Thursday, the sources said Oshawa would finish at least 70,000 of the trucks a year once necessary investments were made, and perhaps as many as 80,000.

The volume is material to Oshawa. The plant is on track to produce about 210,000 vehicles this year, according to Joe McCabe, president of AutoForecast Solutions. Without new investment, production would have fallen to 130,000 vehicles next year.

Wall Street analysts, citing GM documents filed with U.S. regulators, say that GM could reap an average profit of about $13,000 per vehicle on large trucks similar to those to be made at Oshawa. That would suggest a potential increased profit of about $900 million a year.

However, building more trucks could lead to oversupply and lower prices, which cut into profitability.

Another risk for GM is that North American sales will fall, as most analysts have said they expect. Ford Motor Co also has said it expects North American sales to decline from last year’s record levels.

Adding to the risk of making more trucks, analysts have said, is the possibility that gasoline prices will spike. Gasoline prices have been relatively low during the North American auto industry’s recovery that began in 2010 after the recent recession.

A General Motors spokesman declined to comment. (Additional reporting by Bernie Woodall in Detroit; Editing by James Dalgleish)